Italian parties back Monti as crisis threat mounts

July 22, 2012|Reuters

* Senior centre-right politician says "noone will risk acrisis"

* Monti's office dismisses early election report

* Uncertainty over Berlusconi's intentions

By James Mackenzie

ROME, July 22 (Reuters) - Italy's divided political partiesrestated their support for Prime Minister Mario Monti at theweekend, seeking to calm fears of instability that helped driveRome's borrowing costs to dangerous levels last week.

Monti's office dismissed an unsourced report in the Corrieredella Sera that he was considering an early election in theautumn and the parties that back his technocrat government ruledout withdrawing their support in parliament.

"There is no risk to the government, given the overallweakness of the international situation. Noone will risk openinga government crisis," Fabrizio Chicchito, parliamentary leaderof the centre-right PDL party, told the daily Il Tempo.

Enrico Letta, deputy leader of the centre-left DemocraticParty, also dismissed talk of early elections. "The governmentis doing it's work and doing it well," he told SkyTG24television.

Markets have reacted sharply to fears of deadlock afterelections early next year when Monti's technocrat administrationis due to step down, pushing Italy's borrowing costs to levelswhich threaten to spiral out of control.

Political uncertainty was cited by ratings agency Moody'swhen it cut Italy's credit rating by two notches earlier thismonth but Treasury officials have dismissed fears that Italy mayface difficulty on the market, where it still needs to raiseanother 170 billion euros by the end of the year.

However pressure has grown with yields on Italy's 10-yearbonds now at 6.2 percent, more than 500 basis points higher thansafer German Bunds, reflecting the political fears as well asconcerns about a spillover in the debt crisis in Spain andGreece.

Monti, who has ruled out running in 2013, has done much torestore Italy's international credibility since financial marketturmoil forced out former Prime Minister Silvio Berlusconi lastyear but he has faced an increasingly hostile climate at home.

He has pushed through a series of tax hikes, spending cutsand reforms aimed at reining in Italy's 2 trillion euro publicdebt pile and strengthening its stagnant economy which have beenbitterly resented by critics on both the left and right.

He has faced growing discontent at austerity measures whichhave lifted tax rates to record levels and sniping from allsides but any serious political revolt has been held back byfears of market fury were his government to be toppled.

DOUBT OVER BERLUSCONI COMEBACK

On Sunday, there was fresh uncertainty about one of the bigquestions hanging over next year's election, the possible returnof Berlusconi as candidate of the centre-right.

Libero, a newspaper traditionally very close to thebillionaire media entrepreneur, reported on Sunday that the ideaof Berlusconi running in 2013 was not a serious plan but a kindof "joke" on his part.

The report was swiftly denied by Berlusconi's office but IlGiornale, a newspaper owned by his own brother, said the formerpremier would not decide until October whether he would reallyrun in the election or play a behind-the-scenes role.

The PDL has struggled to contain its internal divisionsfollowing Berlusconi's departure, with hardline loyalistssounding an increasingly anti-euro line at odds with the party'straditionally pro-European conservatives.

However recent opinion polls suggest that even if Berlusconireturns, he would lose an election to the centre-left and leavethe PDL battling the anti-establishment Five Star Movement ofmaverick comedian Beppe Grillo for second place.

Much will depend on whether the squabbling parties can reachan agreement on a reform to Italy's universally criticisedelectoral laws, described even by the former minister whooversaw their introduction in 2005 as a "porcata" (crap).

For months, party officials have been discussing changes tothe system, which allows voters to choose only a party orcoalition group not individual candidates but they have so farfailed to reach an agreement which would allow planning for theelections to begin in earnest.